13 to watch in ’13: REBIC and Raleigh

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(Part 10 in a 13-part series)

Editor’s note: For many, 13 is a dreaded number, a cursed pair of digits to be avoided at all costs. But ’13 might be a year of luck and plenty for some Charlotte-area developers and real estate and construction companies.

The Mecklenburg Times, in a 13-part series, will focus on the people, companies and things worth paying attention to in 2013. There’s no science behind our list; simply, our reporting and research have us thinking that these 13 will be among the busiest and biggest newsmakers of the year. Who knows? We could be wrong.

Previous: Beacon Partners

You’re either fer it, or you’re agin it, as they say in the mountains of western North Carolina, and that’s true of possible legislation that REBIC will either back or oppose this year on the other end of the state in Raleigh, where the state legislature is in session.

The Real Estate and Building Industry Coalition, the Charlotte-based lobbying group for homebuilders and Realtors, was on the lookout for issues likely to arise this year long before the North Carolina General Assembly convened its 2013-14 biennium Jan. 30.

Legislators have not yet introduced any bills on the hottest-button issues, but REBIC Executive Director Joe Padilla is already chatting up state representatives and senators about the possible implications for the building and real estate industry of:

• Tax restructuring proposed by Gov. Pat McCrory and others.
• Stalled 2011-12 legislation limiting local governments’ zoning authority.
• And reform of the way the state updates and enforces building codes.

The tax proposals coming from the executive mansion, backed by many in the Republican-controlled statehouse, could be a tough fight for REBIC because McCrory has already warned businesses that he was “going to step on everyone’s toes a little bit” as he tries to end corporate and personal income taxes and institute consumption taxes.

Padilla said REBIC was concerned about — and would fight against — possible tax-reform bills that could be “critical for the real estate industry.”

First off is the possibility that the state would levy tariffs on commissions on sales made by real estate companies. Earlier this year, Charlotte Regional Realtor Association president Locher said those costs would be passed on to home-buyers in the form of higher prices.

Padilla said that possible scenario could be worsened by any attempt by the legislature to add more taxes to real estate transfers, a proposal that was rejected voters seven years ago. Such taxes would have a particularly negative impact on re-sales.

REBIC would also oppose any move to up business-license fees and, especially, any tax on the book value of net assets — cash and real holdings.

“That would be worse than income tax because it would be on assets that are not producing income,” Padilla said.

Any such tax, which would apply to all businesses, would be particularly harmful to an industry “still recovering and so economically vital,” Padilla said. It could discourage investors from accumulating capital to invest in real estate, especially at the 1 percent level being discussed. An investor with $30 million to spend would be taxed $300,000 a year while he or she was spending the two or three years it often takes to put together real estate deals, Padilla said.

A tax on net assets could also encourage investors to avoid paying it by leveraging their holdings or pulling money out of the state, Padilla said.

On the non-tax legislative front, reviving — and passing — last session’s senate bill 731 appears to be far easier task for REBIC and its partner, the North Carolina Home Builders Association. Like SB 731, the proposed new bill would relieve builders of having to fight municipalities and county governments from imposing nonstructural aesthetic restrictions on builders.

An informal survey in October by The Mecklenburg Times found that leading legislators from both sides of the aisle in both houses this session would back a bill similar if not identical to SB 731. Meckleburg Republican Rep. Bill Brawley, speaking for House Speaker Thom Tillis, said the speaker would, unlike last year, allow the bill to come a floor vote, and predicted it would easily win passage, as it did last year in the Senate.

Builders and their allies in the General Assembly say that municipal and county ordinances allowing local officials to mandate the placement of windows or the size of garage doors are unconstitutional because those powers are not spelled out in existing statutes. They say that new legislation reiterating that illegality would be a “reminder” statute that the local ordinances violate the state constitution, which limits local governments to the powers invested in them by the state.

Local government officials, including Huntersville Planning Director Jack Simoneau, say that they aren’t interested in dictating things like brick finishes and house color, but that court decisions give them “wiggle room” to protect the value of existing structures in the vicinity of new construction by enforcing “compatibility” restrictions on builders.

Builders, on the other hand, such as M/I Homes Charlotte spokeswoman Tamara Lynch, say that even minor changes to building plans costs them money, which in turn raises prices.

“The towns have been getting away with passing ordinances that are, quite frankly, illegal, and that must come to an end,” Brawley said.

Last up on REBIC’s priority list, builders want to see legislative action reforming the way state building codes are updated.

They want the code updated every six years instead of the current three. And, more important, they want more time and opportunity between the passage of new regulations and their enforcement to allow builders and local code-enforcement officers and inspectors to learn and implement the changes.

Asked why, Padilla pointed to the March 1, 2012 enforcement date of the most recent code iteration. “They didn’t publish the thing until the end of March, so how was anyone to know the rule?” Padilla said. As a result, builders were caught unawares and building permits log-jammed and backlogged because inspectors didn’t know what to do. “It was a major calamity,” Padilla said.

A good analogy, Padilla said, would be the state division of motor vehicles changing traffic laws but not updating the study guides for drivers seeking license renewals or the grading sheets for local DMV employees.

“We want there to be time to publish the (rule) books, at least put them up on the internet, and let there be some training in the new codes,” Padilla said. “This affects not only builders and inspectors but also architects and engineers — everybody involved.”

The extension of the codes from three years to six would save builders the time and expense of adapting to change.

“We have a pretty full plate” with the new legislature, Padilla said. “But we’re very hopeful of a productive session.”